China’s bespoke demand spawns wave of startups

More members of the Chinese elite are eschewing flashy logos for bespoke goods. CNBC's Julia Wood reports.

When the milliner Elisabeth Koch wore a quirky hat made out of a motorcycle figurine to a gallery opening in Beijing's trendy 798 Art District, Chinese magazine editors swarmed and swooned.

"Before I knew it, they were asking to borrow hats for photo shoots," said Koch, who left a job with a bank to train at the rigorous Wombourne School of Millinery in England before moving to China in 2007. "I just wanted to make hats and sell them. I didn't even think of getting on covers of Vogue or wherever."

But within months of setting up her first home studio Koch's hats were featured in Harper's Bazaar. The hats have also appeared in a Chinese blockbuster film, Dutch Parliament and at racecourses in Sydney, Hong Kong and Kentucky. In December, Mario Testino photographed Koch's hat atop the head of movie star Shu Qi for the coveted cover of Chinese Vogue's 100th edition.

With the introduction of a new, more affordable, line to compliment her bespoke hats, Koch expects her output to quintuple this year.

She's hardly alone.

The milliner has tapped into a surging demand for bespoke luxury products, as members of the Chinese elite differentiate and refine their tastes, eschewing flashy logos and big brands for more personal designs and subtly exquisite craft.

"Customers are more sophisticated now," said Ben Cavender, principle at China Market Research. "They are not just trying to be flashy anymore. They are more likely to buy products that fit their own personal sense of style. They are looking much more closely at the quality of construction craftsmanship the unique story of the brand."

Matteo Colombo | Moment | Getty Images

East Nanjing road, main shopping and touristic street in the centre of Shanghai, with many neon lights and crowded with people, at night.

"People don't think about showing off," Cavender added, "They are choosing a customized item and they are choosing to buy from a smaller brand or they are buying less obvious or less loud products."

Multinationals selling jets, sports cars, suits and sneakers have all sought to cash in on the new appetite for beautiful one-of-a kind goods. But with the children of skilled artisans choosing white-collar work over the family trade, global brands are finding it difficult to recruit enough skilled workers to justify bespoke lines.

"The reality for the larger brands is it is tough to do too much customization," said Cavender. "It's never going to be a good business. For entrepreneurs it's a way to distinguish yourself so people will buy you instead of a big brand."

In 2007, Ines Brunn opened her bike shop, Natooke, in Beijing in hopes that light, fast fixed-gear bikes, personalized down to the very spokes, could boost bike culture.

Thirteen years ago, when Brunn first went to Beijing on a business trip, most people still got around by bike. Standing in a busy road, Brunn, a world class trick cyclist in her spare time, could hear the whirr of thousands of wheels and the polite tinkle of bicycle bells.

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By the time she moved to the Chinese capital just three years later much had changed. The roar of engines and cacophony of car horns had replaced the sound of bicycles as the Chinese auto market surged.

"When I asked someone if they had a bike," Brunn said, "they would say, 'why, do you think I am poor? I don't even know how to write the word bike!' For them, the bicycle was connected with poverty," she said.

She started a regular bicycle polo game and customized her own bike to match her bag and sunglasses. She rode in exhibitions and appeared on TV. Soon, her bicycles became a fixture in fashion shoots and her client-base swelled with Chinese trendsetters, with their own particular demands, like imported components or custom paint to match an outfit or a mood.

But, while demand for high-end bespoke goods is on the rise, providing them on a large scale is challenging.

Even with larger products, business remains too small in scale. Custom automakers Bufori and Morgan Car Company landed in China in 2012 and 2013, respectively; small-scale production is part of their DNA. Malaysia-based Bufori said that its production capacity is just 60 cars a year. But, with a small staff and cars that sell for as much as $350,000 a piece, the model works.

One global company that has sought to tap into the appetite for customization is Hugo Boss, which has expanded and show-cased its in-store tailoring service, points out CMR's Cavender.

In the end, the best chance for customization may lie in the ability of big businesses to replace the expert human attention with a mechanical eye - in the form of software able to take in a customer's needs and make expert judgment as to how to adapt and deliver a product just for them, as Nike and Dell have done elsewhere in the past.

All of which raises the question: are these still custom products?

"Customization is not conducive to operational scale via eCommerce sales," said Andrew Stockwell, an analyst with Forrester Research. "That said, I think we are in a world -- think Dell or Nike -- where customers are more empowered and want more personalized solutions. The hard part is to draw the line, ask where customization starts and to quantify it."